Sramana: What did you learn from watching eBay’s struggle with art auctions?
Alexander Zacke: In the mid-2000’s, it became clear that the peer-to-peer marketplace model, although extremely powerful and scalable, did not work beyond a certain price point. The fine art world will begin at $1,000 which was 20 times the price point of eBay.
I started to develop the idea of building an online marketplace for fine art and fine art auctions. It was very difficult because eBay had failed. If a multi-billion dollar company with top global management has failed, then it is hard to believe that you will succeed in the shadow of their failure. I am not even a tech guy, I’m an art guy. So I had to go find a tech guy.
My co-founder who runs the tech side of Auctionata was introduced to me by the CEO of eBay Europe. We set out to create a marketplace and just put it out there to see what feedback we would get. We did that in 2011 while we were still in Vienna.
Sramana: What was in your minimum viable product?
Alexander Zacke: We launched a product that was a peer-to-peer moderated marketplace with a lot of live auction and listing functionalities. We also had a Facebook-type platform built in. It was as if we had put PayPal, eBay, Amazon, and Facebook into a single website. It was too complicated and became an enormous fiasco. It did not work at all.
Sramana: Did you fund this effort from your family business?
Alexander Zacke: I have always been very careful to keep the family business money separate from my personal business money. I did it with my own money and with some investment of my friends. We also brought on one of the top early stage VCs in Germany in the middle of 2011.
We got a lot of feedback from our first release. What we discovered is that our user base wanted us to replicate a brick and mortar auction house online. It really was that simple. We decided to shut down the old business and re-launch the site. I knew that I needed designers, marketers, and tech guys. That is when I decided to move to Berlin. Vienna just does not have a tech startup scene that I could rely on.
We did our re-launch in November of 2011. We had no more funding so I rented a hotel room and that was our business office. I then met a former eBay executive who was now the CEO of a large rental marketplace. He gave me a few rooms in his office space.
Sramana: You said that you wanted to replicate a traditional auction house. What did that look like for an online business?
Alexander Zacke: A traditional auction house has three services. They provide valuation to potential sellers. They obviously provide the auction service. They also provide a fixed-price format. When we did our re-launch we decided to start with valuation. We created an expert network and offered everyone a free valuation. We would provide that valuation for any antique, piece of art, or collectable.
We put that offer online in a very simple, clear manner. We launched it at midnight and the following morning when I logged in at 9 a.m., we had 27 valuation requests waiting for us. At that point, I knew there was an enormous demand out there for people to get expert online valuations.